On backward stochastic differential equations approach to valuation of American options

Details On backward stochastic differential equations approach to valuation of American options On backward stochastic differential equations approach to valuation of American options

2010-12-20

arxiv.org/abs/1012.4442v1

Mathematics

Probability

Scientific paper

We consider the problem of valuation of American (call and put) options
written on a dividend paying stock governed by the geometric Brownian motion.
We show that the value function has two different but related representations:
by means of a solution of some nonlinear backward stochastic differential
equation and weak solution to some semilinear partial differential equation.

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